3 takeaways on the EU’s car emissions overhaul

Europe’s troubled system of car emissions testing faces a major overhaul if the European Commission muscles through the plan announced Wednesday to give Brussels more power over the industry.

The EU’s regulatory shortcomings were laid bare last year by the Volkswagen emissions scandal, exposed by the more stringent testing system in the U.S.

“The Volkswagen revelations highlighted that the system which allows cars to be placed on the market needs further improvement,” said Jyrki Katainen, Commission vice-president for jobs and growth. “We have to make sure it never happens again.”

Under the current system, the EU sets the broad rules on emissions and safety standards, but those are enforced by EU countries. When a company like Volkswagen or Fiat develops a new car model, it takes about a dozen representative cars off the production line and sends them for testing to ensure they meet safety and environmental regulations.

Those standards are administered by national authorities. But with the exception of the U.K., most of those authorities don’t have their own testing facilities. Instead, they designate a technical service — an outside company which bids for the business — to conducts the tests. Those tests are paid for by the car manufacturer.

There is a potential conflict of interest with testing centers being paid by carmakers.

Once a car is found to meet the standards, it receives an approval from a national certifying agency which is good for all 28 EU countries.

Countries, especially those with big car industries like Germany, France and Italy, have fiercely guarded those national prerogatives. But the system has a lot of shortcoming, as the Volkswagen scandal showed.

There is a potential conflict of interest with testing centers being paid by carmakers, and national authorities are under enormous political pressure to be careful of local car industries.

The Commission’s proposal means that Europe’s lax regulatory and testing regime could soon end. “The Commission didn’t use its powers because we didn’t have those powers,” said an EU official.

Before those changes go into force, they’ll have to be approved EU countries and the European Parliament. But ahead of the political haggling, which could take a year or longer, here are three takeaways on what the Commission aims to do:

1. The existing car approval system would be tightened up

There are three things that Brussels is demanding: more supervision over cars already approved for sale, more EU oversight of the approval process, and more independence for the testing system.

“With our proposals today we will raise the quality and independence of vehicle testing and improve the oversight of cars already in circulation,” Industry Commissioner Elżbieta Bieńkowska said.

First, Brussels wants to keep a closer eye on the test centers by making them less dependent on carmakers. Instead of car manufacturers paying for tests, the Commission wants to pool funds from carmakers so centers aren’t paid directly. It also wants more stringent performance criteria for laboratories. They would also be checked with regular audits.

National authorities responsible for regulating car approvals would be reviewed by similar agencies from other countries to ensure that they aren’t being slack on local carmakers.

Second, the Commission wants to create a market surveillance system that detects offenders early on, by having national governments and the Commission carry out spot checks on cars already on the road. It would also allow all EU countries to take action against offenders in their territory, even if the car models in question were approved elsewhere.

Carmakers would also have to hand over their proprietary software codes to make it possible to detect whether they have put in illegal work-arounds like Volkswagen’s defeat device.

Third, the proposal would consolidate the Commission’s powers by allowing it to suspend, restrict or withdraw a technical service’s designation if it is found to be underperforming or failing to apply the rules effectively. Brussels would also be able to test cars already checked, order recalls and levy fines on carmakers and testing centers.

Carmakers should be prepared for potentially crippling fines, which Brussels hopes will deter behavior like that of Volkswagen. The Commission would be able to levy a fine of up to €30,000 per vehicle, if an EU country doesn’t do so first.

“It is a very significant fine,” said an EU official, adding Brussels had looked at the levels of penalties in the U.S. “This is very much aligned, this penalty has a strongly dissuasive character.”

Carmakers would also have to hand over their proprietary software codes to make it possible to detect whether they have put in illegal work-arounds like Volkswagen’s defeat device. This is another provision Brussels copied from the U.S. system.

“We’re getting closer to the U.S. model where the EPA [Environmental Protection Agency] is checking models,” the official said but “of course, the EPA is the sole agency while the Commission will be an additional layer of supervision.”

It would still be up to national authorities to test, approve and make sure cars comply with the rules.

2. The changes create a potential conflict among national regulators

The new checks and controls could create chaos as national authorities from different EU countries check each other.

Aside from being able to do spot checks of cars on the roads, the Commission is also proposing to give EU countries the power to take “safeguard” actions against non-compliant cars on their territory even if that country didn’t approve the cars. Under current rules, only a country that approved a particular car model can take that step.

According to one industry source, the change could create “chaos in the internal market.”

There’s a backstory to that proposal. In 2013, France tried to block Mercedes cars which had been approved by Germany’s authority KBA, because Mercedes refused to phase out the air conditioning refrigerant they were using and switch to one that complied with new European standards. The French failed, but under the new rules, they could succeed.

Another industry concern is money. Carmakers have to pay for approvals today, but what they don’t want is to bear potentially massive costs for the administration of the new EU fund that’s supposed to distribute the money among the testing centers.

3. EU institutions support the proposal, national governments may not.

The Commission’s proposal is likely to generate resistance from countries with big car industries like Germany, France and Italy.

The European Parliament, however, is signaling its support for the overhaul.

“I share the desire to strengthen market surveillance by enabling European supervision of car certification to ensure that European rules for safety, environmental protection and production are respected,” Françoise Grossetête, a French MEP and vice-chair of the EPP, the largest group in the Parliament, said in a statement.

The ALDE Group, the Liberals in the Parliament, also backs the Commission’s plan.

NGOs are underwhelmed. Greg Archer of Transport & Environment said the Commission is being very tough on the testing centers, but much more careful with national approval authorities.

“If adopted quickly by EU Governments, these measures will contribute to restoring consumers trust in the efficiency of EU control systems,” MEP Dita Charanzova , the group’s coordinator in the European Parliament’s Internal Market Committee, said in a statement.

That’s exactly where the problem will lie, said Bas Eickhout, a Dutch Green MEP, who envisions heavy resistance from some EU countries.

“It boils down to giving away national sovereignty to Brussels,” he said. The Greens are also in favor of more EU supervision.

NGOs are underwhelmed. Greg Archer of Transport & Environment said the Commission is being very tough on the testing centers, but much more careful with national approval authorities.

“That’s the principle weakness we see: Tough on the services less tough on national authorities because they didn’t want to upset [the European] Council,” he said.

The timing of the Commission’s proposals is also no surprise. It comes just a week before MEPs are set to vote on an objection to a controversial decision EU officials took at the end of October giving diesel carmakers more time and leeway to comply with planned new nitrogen oxide standards.

Parliamentary officials say Brussels is trying to give the Parliament something “nice” to avoid it voting down the national experts’ October decision. Many parliamentarians are upset over that decision, feeling it is too lax on the car industry.

The Commission’s proposals also come as the Parliament prepares hearings into the Volkswagen scandal.